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South Africa in the Spotlight

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This is a guest blog post by Jennifer Gorton of Forex Indicators. Jennifer writes on a range of issues related to foreign exchange and commodities trading.

South African fan wearing a makarapa helmetLast Friday was a great day for all sports fans young and old. The start of the 2010 World Cup kicked off between host nation South Africa and our neighbor to the south, Mexico. This is the first time that the host country has been located in the continent of Africa. South Africa will truly benefit from this honor; by receiving many economic benefits from all the prestige the World Cup brings the host country. The competition will continue on for the next month, with the final game scheduled to be played July 11th in Johannesburg’s Soccer City. The money that foreign visitors and fans are bringing into the country will definitely help the nation grow.

South Africa has been mainly known as a major mining country. Its mining strengths include a high level of technical and production expertise, as well as research and development activities. South Africa is primarily known throughout the world for mining diamonds, however, the mining of gold is just as important to the economy. The mining industry there has been around since the English colonized it back in the 1800’s. The major South African diamond company that everyone has heard of is De Beers. Although based out of South Africa, De Beers mines other African nations, including Botswana and Namibia.

South Africa also exports large amounts of iron ore and coal to various parts of the world. The country is the largest supplier to European power plants, and the world’s largest supplier of ferrochrome, which is used in the production of stainless steel. So, when commodity prices fall around the globe, the exports that South Africa mines go down in value. At the moment, commodity prices have remained at stable levels over the past few months, after exploding in the middle part of 2008. A stable commodities market is in everyone’s best interest as it will keep supply and demand at equilibrium.

Commodities prices could rise, however, if the U.S. Dollar becomes weaker against other currencies. Countries like Australia are showing signs of economic growth with good employment numbers. If the U.S. continues to show a high unemployment rate, and low economic growth, the U.S. Dollar could weaken. If the dollar weakens, then the prices of commodities will start to rise. Most commodities prices are priced in U.S. Dollars, so if the dollar weakens, the commodity will become more expensive. At the moment, the Eurozone and United Kingdom are also experiencing high unemployment with weak growth. This will help keep commodities prices from moving too quickly in any one direction.

As an investor in either the commodities or currency markets, you can follow the prices of goods from your online brokerage account. All brokers these days should be able to give their investors the commodity spot price of gold, diamonds, and all other metals that are mined. This will give you an idea, as an investor, if you are positive on a country like South Africa. If you are positive you can invest in the country by buying its currency, the South African Rand; your broker will have many Forex indicators where you will be able to see if the South African Rand is strengthening. I believe that the World Cup will provide a much needed boost to the country’s image and this will help bring in new business development, most likely in the mining sector. Since South Africa has many unrealised assets waiting to be mined, the influx of these new businesses will only help South Africans.

[Image by Coca-Cola South Africa]

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1 Comment

  1. soratothamax says:

    I was thinking about this! I’m so happy Africa is on the map! And all the African singers got the chance to perform!

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